The Role of Directors Flashcards
What is the main responsibility of directors in a company?
A. Managing the company’s daily operations and making decisions on its behalf
B. Owning the company and making investment decisions
C. Handling only financial matters while shareholders run the company
D. Acting only as advisors without decision-making authority
A. Managing the company’s daily operations and making decisions on its behalf
Explanation:
Under Model Articles 3, directors are responsible for day-to-day management. Shareholders own the company but do not control daily operations.
What is the legal minimum number of directors required for a private company?
A. Four
B. Two
C. Three
D. One
D. One
Explanation:
Under s 154 CA 2006, a private company must have at least one director, while a public company requires at least two.
Which of the following is NOT a type of director under CA 2006?
A. Hybrid director
B. Executive director
C. De facto director
D. Shadow director
A. Hybrid director
Explanation:
There is no legal concept of a “hybrid director”. Directors are categorised as:
De jure directors (validly appointed).
De facto directors (act as directors without formal appointment).
Shadow directors (exert control but are not officially appointed).
A company director must be at least how old?
A. 16 years old
B. 18 years old
C. 21 years old
D. There is no minimum age
A. 16 years old
Explanation:
Under s 157 CA 2006, directors must be at least 16 years old.
The board of a company is making major business decisions without shareholder input. What could limit their authority?
A. The company’s constitution and shareholder resolutions
B. Model Articles 3
C. Directors’ personal opinions
D. The company’s financial performance
A. The company’s constitution and shareholder resolutions
Explanation:
Certain decisions, like amending the Articles or removing directors, require shareholder approval (CA 2006). The company’s constitution (Articles of Association) may also limit board authority.
A company with Model Articles is looking to appoint a new director. What provision gives the board the authority to do so?
A. MA 17(1)
B. MA 7
C. MA 3
D. MA 26
A. MA 17(1)
Explanation:
Under Model Article 17(1), directors have the authority to appoint new directors.
A person who is not formally appointed as a director but whose instructions the board follows is known as what?
A. Executive director
B. Shadow director
C. Non-executive director
D. Company secretary
B. Shadow director
Explanation:
Under s 251 CA 2006, a shadow director is a person whose instructions the board is accustomed to following, even though they are not formally appointed.
A company director who is responsible for overseeing strategic direction but does not manage daily operations is known as what?
A. Executive director
B. Shadow director
C. Non-executive director
D. De facto director
C. Non-executive director
Explanation:
A non-executive director provides strategic oversight but does not take part in daily management.
Alex, a director, has been disqualified but continues making company decisions. What is the consequence?
A. Alex will be removed from office but face no further action
B. Alex can continue as a director with shareholder approval
C. Alex must be given six months to appeal
D. Alex can be personally liable for the company’s debts
D. Alex can be personally liable for the company’s debts
Explanation:
A disqualified director who continues acting can be personally liable for company debts and face criminal penalties under the Company Directors Disqualification Act 1986.
A person is acting as a director without formal appointment. What type of director are they?
A. Executive director
B. Non-executive director
C. De facto director
D. Company secretary
C. De facto director
Explanation:
A de facto director acts as a director without formal appointment and is subject to the same legal duties as officially appointed directors.
The directors of a company decide to issue new shares without consulting the shareholders. What determines whether they can do this?
A. The financial health of the company
B. The opinions of the board members
C. The size of the company
D. The company’s Articles and shareholder approval requirements
D. The company’s Articles and shareholder approval requirements
Explanation:
Certain decisions, including issuing new shares, often require shareholder approval unless the Articles provide otherwise.
A company is operating without a company secretary. What is the legal consequence?
A. No consequence, as company secretaries are optional
B. The company must appoint a secretary within 30 days
C. The company is in breach of CA 2006 if it is a public company
D. The company will be fined immediately
C. The company is in breach of CA 2006 if it is a public company
Explanation:
Under s 271 CA 2006, public companies must have a company secretary. Private companies are not required to have one (s 270 CA 2006).
A company is looking to appoint a 14-year-old as a director. What will happen?
A. They cannot be appointed as they do not meet the legal age requirement
B. They can be appointed if they have parental consent
C. They can be appointed as a non-executive director only
D. They can be appointed if they hold shares in the company
A. They cannot be appointed as they do not meet the legal age requirement
Explanation:
Under s 157 CA 2006, directors must be at least 16 years old.
Which statement about executive and non-executive directors is correct?
A. Non-executive directors provide oversight but do not manage daily operations
B. Executive directors only provide advice and oversight
C. Non-executive directors are involved in daily operations
D. Executive directors are not legally responsible for company decisions
A. Non-executive directors provide oversight but do not manage daily operations
Explanation:
Executive directors are involved in daily operations, while non-executive directors provide strategic oversight but do not manage the company.
